Former leading New Zealand publisher and bookseller, and widely experienced judge of both the Commonwealth Writers Prize and the Montana New Zealand Book Awards, talks about what he is currently reading, what impresses him and what doesn't, along with chat about the international English language book scene, and links to sites of interest to booklovers.

Wednesday, January 09, 2013

The new guard: Look at who is buying technology companies now

A few days ago, I
pointed out the inevitability of the Internet and how it was going to play
an increasing role in the companies that have traditionally not been classified
as technology companies. Those companies — big and small — are going to find it
difficult to find a future without utilizing technology. And that means
embracing mobile, cloud, data and the state of connectedness.

For me that is one of the more exciting
developments over the last few years and it should excite everyone in the
technology ecosystem, especially startups. Traditionally, the buyers for
startups have been the big tech companies themselves — Facebook, Google, Yahoo,
Microsoft and sometimes Amazon and Apple. Sure Cisco would pony up some big
dollars or HP would get drunk and blow its cash on something, but the big
buyers for the web-and-oriented startups have usually been big web & mobile
giants.

Now we are seeing the emergence of a group of
companies who seem to be hungry buyers for technology. Just take a look: we are
not even ten days into 2013 and we have already seen had two big acquisitions
by what we in the Valley don’t see as technology companies. Avis bought ZipCar
for about $500 million and today Athena Health announced that it
was spending about $293 million on a doctor-focused app/service called
Epocrates.

I wouldn’t be surprised if we see more of this
in coming months. Why? The reasons are not that complex actually. Typically the
tech giants buy startups (loosely speaking) in order to acquire talent and in
very rare cases, technology (like Apple buying Siri). But for the most part,
the motive behind Internet giants’ buying frenzy is mostly about finding the
right people to keep competing with their rivals.

The big non-technology companies have similar
needs but they are in much more desperate need of this makeover. Not only do
they need the talent, these traditional corporations need a new
technology-centric way of thinking if they need to evolve their business models
for the post iPhone world.

Today a retailer like Macy’s or Walmart can get
by on the strength of their scale and might. However, if in the future they
need to combat Amazon, they need to adopt internet business practices and use
data intelligently. My
colleague Derrick Harris recently wrote that big data technologies, at
least for now, are like manufacturing robots — helping people do things they
do, faster, at a larger scale and cheaper than alternatives.

A physical retailer of tomorrow would somehow
have to create a compelling app experience and use that data, geo-location
information and buying habits to offer in-store discount (or a shopping
experience) that is highly customized to an individual. If they don’t — well,
Amazon or someone like Amazon is going to get my dollars.

Today it might not seem obvious, but a year or
two from now, companies big and small are going to realize that emergence of
mobile and other newer technologies are going to redefine the a business
experience. As Ed
Aten in a guest post pointed out this weekend, all businesses are now
24-hour operations. “The offline world is filled with friction, inefficiency,
incomplete information, tedium and excess capacity,” he wrote. And that also
means inefficient businesses and other edifices of a different era.

Think of this way: Today, a problem with your
local Starbucks isn’t localized. Thanks to Twitter and Facebook, the internet
is the new weapon of mass complaining. Price checks conducted via mobile apps
are going to become a default behavior, especially as a whole generation of
internet users (natives) grows up to become the next big consumer group.

To be clear, I am not saying that the
traditional companies will stop doing what they do. It is just that they need
to do it much more smartly, using technology and understanding that the
internet is as much a business reality as say outsourcing or scale. A
friend explained it best when he said that the U.S. auto industry in the 1970s
and 1980s suffered because of process innovation at their Japanese
counterparts. The state of connectedness is a similar kind of reality for
businesses — all of them, including those in technology industry.

So startups, the next time someone asks you,
“who is a potential buyer?” Just say, “We don’t know. It could be anyone.”